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act, except for foundation managers

a. Type I, Type II, and Type III

Schedule D—Initial

whose participation was not willful and

functionally integrated supporting

was due to reasonable cause. Any

organizations (as described in section

Taxes on Investments

foundation manager who took part in

4942(g)(4)(B)) if a disqualified person of

making the investment must pay the

the foundation controls such supporting

That Jeopardize

tax.

organization or the supported

Charitable Purpose

organizations of such supporting

Specific Instructions

organizations, and

(Section 4944)

b. Type III supporting organizations

Part I. Complete this part for all

(as described in section 4943(f)(5)(B))

taxable investments.

General Instructions

that are not functionally integrated with

Part II. Enter in column (a) the names

its supported organizations; or

Requirement. Complete Schedule D if

of all foundation managers who took

5. For any purpose other than

you answered “Yes” to Form 990-PF,

part in making the investments listed in

religious, charitable, scientific, literary,

Part VII-B, question 4a or b, or Form

Part I. See Initial taxes on foundation

educational, or public purposes, or the

5227, Part VI-B, question 78a or b.

managers above.

prevention of cruelty to children or

Report each investment separately.

If more than one foundation

animals.

Paying tax and filing a Form 4720 are

manager is listed in column (a), each is

required for each year or part of a year

Exceptions. Section 4945(d)(4)(B)

individually liable for the entire amount

in the taxable period that applies to the

provides an exception to taxable

of tax in connection with the

investments that jeopardize the

expenditures that applies to certain

investment. However, the foundation

foundation’s charitable purpose.

grants to organizations when the

managers who are liable for the tax

Generally, the taxable period begins

granting foundation exercises

may prorate payment among

with the date of the investment and

expenditure responsibility described in

themselves. Enter in column (c) the tax

ends with the date corrective action is

section 4945(h). Additional information

each foundation manager will pay.

completed, a notice of deficiency is

on special rules and exceptions to the

mailed, or the initial tax is assessed,

Carry the total amount in column (d)

definition of taxable expenditures given

whichever comes first. Therefore, in

for each foundation manager to page 1,

above can be found at

addition to investments made in 2010,

Part II-A, column (d).

gov/irm/part7/irm_07-027-019.html.

include all investments subject to tax

Initial tax on foundation. An initial

that were made before 2010 if those

tax of 20% is imposed on each taxable

investments were not removed from

Schedule E—Initial

expenditure of the foundation.

jeopardy before 2010 and the initial tax

Taxes on Taxable

Initial tax on foundation managers.

was not assessed before 2010.

When a tax is imposed on a taxable

Expenditures (Section

Taxable investments. An investment

expenditure of the foundation, a tax of

to be taxed on this schedule is an

4945)

5% of the expenditure will be imposed

investment by a private foundation that

on any foundation manager who

jeopardizes the carrying out of its

agreed to the expenditure and who

General Instructions

exempt purposes (for example, if it is

knew that it was a taxable expenditure.

determined that the foundation

Foundation managers whose

Requirement. Complete Schedule E if

managers, in making the investment,

participation was not willful and was

you answered “Yes” to Form 990-PF,

did not exercise ordinary business care

due to reasonable cause are not liable

Part VII-B, question 5b, or Form 5227,

and prudence, under prevailing facts

for the tax. Any foundation manager

Part VI-B, question 79b. Complete

and circumstances, in providing for the

who took part in the expenditure and is

Parts I and II of Schedule E only for

long- and short-term financial needs of

liable for the tax must pay the tax. The

expenditures that are subject to tax.

the foundation to carry out its exempt

maximum total amount of tax on all

Note. Also, see Schedule F, Initial

purposes). See Regulations section

foundation managers for any one

Taxes on Political Expenditures.

53.4944-1(a)(2). An investment is not

taxable expenditure is $10,000. If more

taxed on this schedule if it is a

Taxable expenditures. With certain

than one foundation manager is liable

program-related investment; that is, one

exceptions, this means any amount a

for tax on a taxable expenditure, all

whose primary purpose is one or more

private foundation pays or incurs:

those foundation managers are jointly

of those described in section

and severally liable for the tax.

1. To carry on propaganda or

170(c)(2)(B) (religious, charitable,

otherwise influence any legislation

Specific Instructions

educational, etc.). A significant purpose

through:

of such an investment cannot be the

a. An attempt to influence general

Part I. Complete this part for all

production of income or the

public opinion or any segment of it, and

taxable expenditures. Enter in column

appreciation of property. See section

b. Communication with any member

(f) the number designation from Form

4944(c) and Regulations section

or employee of a legislative body, or

990-PF, Part VII-B, question 5a, or

53.4944-3.

with any other government official or

Form 5227, Part VI-B, question 79a,

Initial taxes on foundation. The

employee who may take part in

that applies to the act; for example,

initial tax is 10% of the amount invested

formulating legislation;

“5a(1).”

for each year or part of a year in the

2. To influence the outcome of any

Part II. Enter in column (a) the names

taxable period.

specific public election, or to conduct,

of all foundation managers who agreed

Initial taxes on foundation managers.

directly or indirectly, any voter

to make the taxable expenditure. See

When a tax is imposed on a jeopardy

registration drive;

Initial tax on foundation managers

investment of the foundation, the tax

3. As a grant to an individual for

above. If more than one foundation

will be 10% of the investment for each

travel, study, or other purposes;

manager is listed in column (a), each is

year or part of a year in the taxable

4. As a grant to an organization not

individually liable for the entire tax in

period, up to $10,000 for any one

described in section 509(a)(1), (2), or

connection with the expenditure.

investment. It is imposed on all

(3) or that is not an exempt operating

However, the foundation managers who

foundation managers who took part in

foundation (as defined in section

are liable for the tax may prorate the

the act, knowing that it was such an

4940(d)(2)). This includes grants to:

payment among themselves. Enter in

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Form 4720 Instructions

Instructions For Form 4720 - Instructions For Return Of Certain Excise Taxes - Department Of The Treasury - 2010 Page 10

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